South Africa: Western Cape High Court, Cape Town

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Burger and Another v Poignant Progress BK and Others (2473/2009) [2010] ZAWCHC 643 (26 February 2010)

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JUDGMENT DELIVERED THIS 26^th DAY OF FEBRUARY 2010

KOEN AJ.

1. This is an application for an order declaring an agreement of sale of immovable property to be void; cancelling the title deed relating to the immovable property in question; and cancelling a mortgage bond registered over the property.

2. In brief, the salient facts are these. On 6 June 2006 the Applicants concluded an agreement for the sale to them of a unit in a sectional title development in the Strand (to which I shall refer as the "unit") with the First Respondent. The First Respondent's sole member was Mr Du Toit, an attorney of this Court. He was also the First Respondent's attorney, and his firm acted as conveyancer on behalf of the Third Respondent in regard to registration of the mortgage bond adverted to above. The other parties to the application were cited because of their potential interest in the matter, but no relief was sought against them, and they did not participate in the hearing, save for the Registrar of Deeds who has filed a report stating that from a registration point of view he has no objection to the orders sought being made.

3. The sale agreement was subject to the fulfilment of two suspensive conditions. One of these related to the obtaining by the Applicants of mortgage bond finance in an amount of R 585 000 by 16 June 2006. It is common cause that this suspensive condition was not fulfilled the finance having been obtained on t August 2006. by which stage the agreement had already lapsed.

4. The sectional title development of which the unit formed part took some time to get off the ground. During November 2007 documentation was sent to the Applicants by Du Toit's firm in regard to the transfer of the unit, and also the registration of the bond, which Du Toit's firm had been instructed to register by the Third Respondent to secure the mortgage loan to which the sale agreement was subject. The Applicants signed the documents, which included a power of attorney to pass a bond over the unit on registration of transfer thereof into the names of the Applicants.

5. For months still nothing happened. The Applicants became impatient and sought legal advice. On 26 June 2008 a letter was written to the First Respondent, care of Du Toit, pointing out that the agreement had lapsed due to non-fulfilment of the suspensive condition. The letter ended by stating that if no response was received to it, it would be assumed by the Applicants that the First Respondent agreed with its content, and that the mortgage finance which had been approved would be cancelled. As it happened no response was forthcoming. The Applicants say that they therefore concluded that it was agreed that the sale had lapsed and that nothing further would transpire.

6. In spite of the content of the June 2008 letter, on 12 December 2008, ownership of the unit was transferred into the names of the Applicants by Du Toil's firm and a mortgage bond in favour of the Third Respondent was registered over the property, ostensibly under the authority of the power of attorney signed by the Applicants more than a year earlier. The proceeds of the bond were paid to the First Respondent by Du Toit's firm, who caused the bond to be registered at the behest of the Third Respondent. The Applicants came to know of the transfer when they received an email to this effect on 15 December 2008.

7. These are the facts which lie at the heart of this application in which the Applicants seek orders declaring the sale agreement to be null and void; cancelling the deed of transfer in terms of which the unit was purportedly transferred into their names: and cancelling the mortgage bond in favour of the Third Respondent which was registered over the unit on the date that transfer was effected.

8. In the answering affidavit filed by the First Respondent, deposed to by Du Toit, the First Respondent contended that the law permitted the transfer of ownership of immovable property pursuant to an invalid agreement where both parties intended that ownership be transferred and where it could be shown that delivery had taken place. In this regard it was alleged by Du Toit that an oral agreement that transfer be effected against a reduction in price in the amount R 20000 was reached between the Applicants and one Ms Janine Barry. She was an estate agent who acted on behalf of the First Respondent The Applicants denied the existence of such an agreement saying that they had been approached about this by Barry but had not agreed.

9. Du Toit's evidence in this regard was the subject of an application to strike out because Ms Barry had not deposed to an affidavit in the application and it was argued that Du Toit's evidence was thus hearsay. This is plainly correct and Du Toit's evidence in this regard falls to be struck out. There is accordingly no admissible evidence before the Court of the alleged agreement between the Applicants and Ms Barry

10.lt was also contended on behalf of the First Respondent that the doctrine of fictional fulfilment was of application and that the suspensive condition was to be deemed to have been fulfilled. But this line of defence was abandoned during the hearing, no doubt because there was no factual basis laid in the affidavits to underpin it.

11. Counsel for the First Respondent relied on the decision in Legator McKenna v Shea 2010 (1) SA 35 (SCA). In Legator Brand JA confirmed that the abstract theory of transfer was part of our law. even in regard to a transfer pursuant to a sale of immovable property. He put it thus: "In accordance with the abstract theory the requirements for the passing of ownership are twofold, namely delivery-which in the case of immovable property is effected by registration of transfer in the deeds office-coupled with a so-called real agreement or saaklike ooreenkoms'. The essential elements of the real agreement are an intention on the part of the transferor to transfer ownership and the intention of the transferee to become the owner of the property."

12. What was in issue in this case was whether the Applicants had the intention to become owner of the unit In the founding affidavit they alluded to the letter written by their attorney on 26 June 2008 from which it is plain that they did not have such an intention. They considered the sale to have lapsed, and believed that this was accepted by the First Respondent. All that the First Respondent put up to controvert this was Du Toit's reference to the alleged agreement with Barry which, as already indicated, is inadmissable because there is nothing from Ms Barry to confirm the alleged agreement. I might add that a document, purportedly signed by Barry, was put up by First Respondent in order to evidence the conclusion of the alleged agreement. The document was signed only by Barry, and it referred to a "refund" in the sum of R 20000 to be paid by First Respondent to the Applicants on the date of registration of transfer of the unit to the Applicants. It is not alleged by First Respondent that the refund was paid, as one would expect had this occurred. This underscores, in my view, that no real and genuine dispute of fact that an agreement in the terms alleged by Du Toit exists.

13. Moreover, it is not in dispute that Ms Barry approached the Applicants and proposed the reduction in price of R 20 000 for the transfer to be continued with. The very fact that Barry approached the Applicants to make this proposal shows that Du Toit and First Respondent knew that the Applicants regarded the sale as lapsed and did not intend to take transfer

14.There is no dispute abouf the invalidity of the sale agreement it being common cause that the suspensive condition relating to the obtaining of the bond was not fulfilled. There can be no reason why an order declaring this to be so should not be made. In my judgment the Applicants have also succeeded in showing that they are not the owners of the unit in question. They are entitled to an order cancelling the deed of transfer which reflects them as such.

15. The mortgage bond was registered by Du Toit acting under the power of attorney given to him during November 2007 by the Applicants. The Applicants did not acquire rights of ownership over the unit. Never having been the owners of the unit it follows, as I see, that they could not have lawfully encumbered the unit by the registration of a mortgage bond over it. Accordingly an order cancelling the registration of the bond must be made Of course, it will be noted from what I have said above, that the Applicants could not have expected the power of attorney executed by them in November 2007 to have been acted upon after their attorney had written to Du Tort to point out that the sale had lapsed.

16.The Third respondent was represented at the hearing It had relied on the truth of what it had been told by Du Toil its conveyancer, and concluded that the bond in its favour had been validly registered. But counsel who appeared for the Third Respondent conceded, very properly as I see it. that if it were to be found that the Applicants had never become the owners of the unit then the mortgage bond registered in favour of the Third Respondent would fall to be cancelled

17.There is a further matter which I must mention. Du Toft's firm acted as conveyancer for First Respondent. He was First Respondent's only member. His firm also acted as conveyancer for the Third Respondent in encumbering the property by registration of the Mortgage Bond. I would think that he was under a duty to have told Third Respondent about the fact that the suspensive condition had not been fulfilled; and about the content of the letter sent to him during June 2008 in which it was made perfectly clear that the Applicants considered the sale agreement to have lapsed No doubt the Third Respondent would have taken a different view of the loan it had agreed to advance to the Applicants to enable them to pay for the unit had they known about these matters. Although there is nothing in the papers to suggest that he did so this is not a matter I can properly decide on these papers. But it is a matter which calls for investigation Accordingly. I propose to request the Registrar to forward this judgment to the Cape Law Society, together with a copy of the papers in this matter, in order that Du Toit's conduct may properly be investigated.

18. The following order is therefore made:

1. The Deed of Sale concluded between the Applicants and the First Respondent on 6 June 2006 is declared to be null and void;

2. Deed of Transfer No. ST29697/2008 is hereby cancelled;

3. Mortgage Bond No. SB15014/08 is hereby cancelled:

4. The First Respondent is directed to pay the costs of this application.

S J KOEN AJ